EU Presidency Statement - The EU, the UN and the Challenges of Globalization

Ladies and Gentlemen !

It is a great honor for me to be here today in the United Nations, and to have this opportunity to share with you some of my reflections on globalization. I will try and not speak for too long so that we will also have time for your comments and views.

I don't know how frequent Trade Ministers are in the halls of this building, but I guess we are not so frequent. I think we should be.

Trade - and I am talking about free and rules-based trade, is a necessary though not sufficient instrument to combat poverty and achieve peace.

For a long time trade has been seen as an instrument working only in the interest of the market forces, widening gaps between rich and poor and contradicting goals of development.

I think today there is a much more realistic view. Human development is a common challenge and a common responsibility for all of us.

In the time of globalization this has become even more evident. Gaps between rich and poor are widening, despite the tremendous wealth that is created in the world.

This is unacceptable, but I am optimistic - we can change the world.

However, I also want to be the first one to admit that we politicians have a great responsibility for the tragic state of the world. We have allowed globalization to create its own rules along the way without interfering.

I understand the anger of the protesters in the street, who want to stop globalization.

We politicians haven't lived up to our responsibility to shape globalization and to bring a sustainable development for people, for the environment and for a more equitable world.

It is high time we take this responsibility. We must start acting to shape globalization and restore the balance between the market forces and the democratic forces. I am convinced it is possible and I think we need to start in three fields:

First, we must start cooperating better between different policy areas - such as trade, development, foreign policy and finance - for example, both within countries and between international bodies.

Second, we must argue for open and rules based trade as the best instrument to shape globalization. No one can be forced to participate, but a country which turns the offer down must know it has consequences for the potential for development.

And third, we must be able to offer security for people. National as well as global policies must have this aim or people will not be capable to deal with the changes globalization brings.

The first challenge, lack of political coherence, is so obvious, that it is often embarrassing.

We in the rich countries say free trade is a great thing when it comes to goods and services produced by our companies. But it is hard to find any enthusiasm when it comes to free trading for products from the developing countries.

Hopefully the European Union is now leading the way to a different attitude.

A few weeks ago I chaired the General Affairs Council of the European Union when it took the decision to abolish all barriers to trade from the 49 Least Developed Countries. It was a historic and very important decision which demonstrated that the European Union wants to be coherent, wants to include the poorest countries into the world economy.

I can assure you it was not an easy process, politicians in a few countries were under severe pressure from strong interest groups.

But the decision was taken and although the time-frame did not become as progressive as we had hoped, in the long term it provides excellent potential for development.

The European Union decision should now be followed by others. Some countries have already taken, or is about to take, similar decision. Still of course, the most important markets, the United States and Japan, are crucial.

To support the countries which can now trade freely, appropriate development assistance must be provided to ensure that the potential can be released.

I have also been disturbed by a lack of coherence within a government. Take the issue of core labor standards for example. More than 130 governments have ratified the ILO Core Conventions. Still, when the same governments change hats and become World Trade Organization members, the issue of implementing the conventions suddenly provokes very strong feelings.

How can we even start talking about coherent policy making when we behave like this ?

I think we must quickly go home and do our home work - and it is urgent. We must be able to act more efficiently in global fora, nations must enter with a solid and coherent national mandate.

* * *

The lack of coherence was the first challenge we must deal with to be able to shape globalization.

The second challenge, as I see it, is to establish a common understanding of the potential of free and rulesbased trade as an instrument to achieve development.

This is not a big challenge, it is becoming more and more widely established in wider circles.

But, still there is often a reservation, saying "fine, but developing countries must still be allowed to protect their markets to build an economy."

The policy for free and fair trade has failed so far, I am the first on to admit that.

Too many barriers remain, too many countries are excluded from the world economy - and have little access to the positive sides of globalization.

But the conclusion must not be protectionism, not for developing countries or anyone.

Free trade is an offer, but those who say no must understand they also turn their backs on a development potential and misses an opportunity to combat poverty.

To call for protectionist measures is misguided benevolence.

Developing countries must open their markets, but not mainly so that the developed countries can have market access. The main part of trade is between neighbors, and as poor countries normally are neighboring other poor countries, we are talking about poor countries increasing trade with other poor countries.

This trade is a prerequisite for their development.

This is also why the Economic Partnership Agreement between the European Union and the ACP-countries which starts in 2008 is important in this context since ACP-countries will be able to sign free trade agreements with the EU as groups of countries building on their own regional schemes.

A country that opens up its market will pay a short term and sometimes very high price for adjustment. Developing countries mostly lack capacity to deal with necessary reforms and in addition they are often relying on tariffs as a major source of income. Development co-operation can play an important role in creating necessary infrastructures.

Political initiatives for increased free trade are often met with suspicion from developing countries also because of lack of confidence. In some cases I respect this.

The WTO has for too long been dominated by the industrial countries and this must change - otherwise there will be no new rounds of negotiations.

All countries must have a fair chance to participate in shaping the rules that affect them. Developing countries must get special support to be able to participate in negotiations on equal terms.

The rich world must do its home-work but so must the developing countries. I just want to mention one issue which to me is a serious obstacle to confidence-building and to development and that is corruption. I think we must face this problem honestly and firmly. We must not pretend, for instance, that protectionism in many cases isn't but expressions of corruption and nepotism.

There is a strong causality between corruption and poverty.

International organisations can do a lot to fight corruption. The OECD has agreed on a convention that makes it illegal for our companies to pay bribes to officials, also in other countries. Wherever the bribe is paid, it is illegal in the home OECD country which puts the focus on the person who bribes and not on the bribee.

The fight against corruption is a priority for the Swedish Government and we think development co-operation can be used as a tool to fight these abuses.

* * *

That was my second challenge, which concerned the importance of developing free and rules-based trade as the most important instrument to shape globalization.

This leaves me with my last challenge as a politician; to create popular legitimacy for globalization.

Here again, I will be self-critical; we politicians are to blame for the lack of confidence.

We have been silent and often passive, not seizing the opportunities of globalization. We have also sometimes put the blame on globalization when it in fact has been we ourselves who did not live up to our responsibilities.

To shape globalization, there must be popular support at home. And this can only be through policies that provide security in times of change; education, health, labor market policies, social security for all - a well functioning welfare state that is.

But it is not enough. We must also show that free trade and economic growth can be achieved in harmony with other policy areas, such as the observance of human rights and high environmental ambitions.

This is a further strong argument for coherent policy-making.

If we do not succeed in this there is a great risk for a popular back-lash on globalization.

What does this mean ? Well, our possibilities to combat poverty and achieve equity in this world will decrease substantially.

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• Commissioner Wallström's speech on Global Sustainability (26/2/2002)
• EU Presidency Statement - Globalization (21/9/2001)
• Making Globalization Work for the Poor  (20/6/2001)